Kyrgyzstan imposes state of emergency to protect Centerra mine

BISHKEK (Reuters) - Kyrgyzstan's government imposed a state of emergency on a northern district on Friday to protect Centerra Gold's Kumtor mine from protesters.

Police on Friday cleared away demonstators who had been blocking the road to Kumtor for days and arrested 92 people, Prime Minister Zhantoro Satybaldiyev told a news conference.

A few hours later police used tear gas and stun grenades in clashes with villagers who tried to seize a substation and cut power supplies to the mine, a police spokesman said. Several protesters were hurt.

Hundreds of villagers had blocked the road to Kumtor, in Dzhety Oguz district, on Tuesday afternoon and threatened to move on the mine if the government did not tear up its agreement with the company.

President Almazbek Atambayev imposed the state of emergency and a curfew on Dzhety Ohuz district of the Issyk Kul region until June 10, his office said.

"Those who broke the law must be brought to justice in line with the full severity of the law," it quoted Atambayev as saying during a meeting with security officials.

The villagers had put forward a list of demands to Centerra Gold, varying from building roads and a kindergarten and laying water pipelines to giving them long-term loans, offering them jobs at Kumtor, and buying equipment for local hospitals.

The protesters moved on Thursday night to an electricity substation feeding the mine and forced its operators to cut off power. Centerra Gold said it had begun an orderly shutdown of the milling facility using back-up diesel-generated power.

The police action prevented the mine from shutting down.

"Electricity is being supplied now," Satybaldiyev said. "The open-pit mine is running and was never stopped...As for gold extraction, maybe output decreased somewhat." He gave no detail.

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Centerra Gold, which alone contributed 12 percent to Kyrgyzstan's gross domestic product in 2011, is under immense pressure in the Muslim nation of 5.5 million which has seen two presidents toppled since 2005.

Kyrgyz nationalist deputies and groups are calling for the nationalization of the mine - the biggest gold venture run by a Western company in Central Asia - and parliament has set a deadline of June 1 for the government to renegotiate or repudiate - a 2009 deal struck with Centerra to operate Kumtor.

A state commission said Centerra had been paying too little to run Kumtor and accused it of causing environmental damage.

Prime Minister Satybaldiyev said the government would miss the deadline as it needed more time for talks with Centerra.

"They agree to establish a joint venture by unbundling Kumtor from Centerra and registering it in Kyrgyzstan. If such joint venture is created, cash flow will double," he said without giving further details.

Asked whether the government could consider cancelling its current agreement with Centerra, he said: "If we reach no results, this issue will be on the agenda."

Centerra Gold could not be immediately reached for comment.

Kyrgyzstan currently owns a third in Centerra Gold. Kumtor is Centerra's core asset.

Centerra had estimated production of between 550,000 and 600,000 ounces from Kumtor in 2013, up sharply from last year's 315,238 when ice movement in the pit slashed output.